Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614

Volume 3, No.9, September 2014

Rural Development in India: What roles do NABARD & RRBs

play?
Dr. Swapan Kumar Roy, Assistant Professor in Commerce, Bethuadahari College, Nadia, West Bengal, India
Abstract
India is a country of villages. According to Census of India’s 2011 Provisional Population, out of 121 crore Indians, 83.3
crore live in rural areas while 37.7 crore stay in urban areas. There are about 6 lakhs villages in our country. Around
70% of the population of India lives in villages i.e. rural areas. So the rural areas need to be developed. NABARD plays a
significant role in developing rural economy. NABARD, being an apex Development Bank, facilitates credit flow for pro-
motion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural
crafts. It also supports all other allied economic activities in rural areas. Regional Rural Banks (RRBs) in India were es-
tablished in October 2, 1975. Since its inception, these banks have been playing a key role in the economic development of
rural India. The main motto of establishing this bank in India was to provide credit to the rural people (people living in
poverty and not economically sound) and to inculcate banking habits among rural masses. So NABARD and RRBs have
been playing a catalyst role for the development of rural areas. These two are committed to promoting rural development.
The first one i.e. NABARD has effectively brought in a number of innovations in the rural credit domains. Some innova-
tions for the development of rural India are (a) Formation & Linkage of SHGs, (b) Farmers Club, (c) District Rural Indus-
tries Project, (d) Kisan Credit Card (KCC), (e) Rural Infrastructure Development Fund (RIDF), (f) Watershed Develop-
ment and many more. These schemes/programmes/policies have helped develop rural economy. Sustainable economic
growth is the mantra of our government’s development policy. It cannot be gainsaid that development and transformation
of rural economy needs rapid expansion of employment and income opportunities. It is possible if rural economy is devel-
oped through economic betterment of people as well as greater social transformation. The policies and programmes un-
dertaken by our government are designed with the aim of alleviation of rural poverty, which has been one of the primary
objectives of planned development in India. In this backdrop, an attempt has been made in this paper to analyze and eva-
luate various policies/programmes/schemes undertaken by NABARD & RRBs for rural development.

Keywords: KCC, NABARD, RIDF, RRB, Social Transformation and Sustainable Economic Growth.

Introduction b) Discussing about National Bank for Agriculture and

India is a country of village and farmers. More than
65% of the country’s population lives in rural areas. Po-
verty is mainly a rural problem. To eradicate poverty and
develop rural economy, it is imperative to develop rural
areas. Development minus rural India becomes lopsided
and unsustainable. Rural development means a structural
change in the socio-economic situation to achieve im-
proved living standard of low income population resid-
ing in rural areas and making the process of their devel-
opment self sustaining. Rural development implies both
the economic betterment of people as well as greater
social transformation. In order to provide the rural
people with better prospects for economic development,
increased participation of people in the rural develop-
ment programmes, decentralization of planning, better
enforcement of land reforms and greater access to credit
are envisaged. Different policies and programmes have
been undertaken by the Government of India for devel-
oping rural economy.
Objectives of the Study
The study aims at:
a) Throwing light on various programmes/policies
adopted by the Government of India for rural devel-
opment;
Rural Development (NABARD) and Regional Rural
Banks (RRBs) in short;
c) Studying the schemes/programmes undertaken by
NABARD;
d) Analyzing and evaluating the schemes/programmes
that contribute to rural development of our country
and
e) Making concluding remarks.
Methodology
The study is based on secondary sources of da-
ta/information. Different books, journals, newspapers
and relevant websites have been consulted in order to
make the study an effective one.
Rural Development: Government’s Initia-
tives
Mahatma Gandhi National Rural Employment
Guarantee Act (MGNREGA)
National Rural Employment Guarantee Act was enacted
on 5th September, 2005 and came into force w.e.f. 2nd
February, 2006. On 31st December, 2009, the Act was
renamed by an Amendment as the Mahatma Gandhi Na-

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 Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614
Volume 3, No.9, September 2014

tional Rural Employment Guarantee Act. This pro-
gramme directly touches lives of the poor and promotes
inclusive growth. The Act aims at enhancing livelihood
security of households in rural areas of the country by
providing at least 100 days of guaranteed wage employ-
ment in a financial year to every household whose adult
members volunteer to do unskilled manual work.
Bharat Nirman
Government’s initiatives towards the development of
rural economy need no description. Our government has
taken a number of initiatives for the development of ru-
ral people living in rural areas. Bharat Nirman is one of
such initiatives, which aims at upgrading rural infrastruc-
ture in a time-bound manner. The Government of India
launched it in 2005-06. It is an important initiative for
reducing the gap between rural and urban areas and im-
proving the quality of life of people in rural areas.
Bharat Nirman programme launched by the Government
of India identified six core infrastructure sectors in rural
areas. This has been shown in a tabular form.

Components Scheme Goals

Roads Pradhan Mantri Gram Sadak Yojana Every habitation over 1000 population
(PMGSY) and above (500 in hilly and tribal areas)
to be provided an all-weather road
Electricity Rajiv Gandhi Grameen Vidyutikaran Yoja- Every village to be provided electricity
na (RGGVY)
Drinking water Accelerated Rural Water Supply Pro- Every habitation to have a safe source of
gramme (ARWSP) drinking water
Telecommunication Village Public Telephones (VPT) Every village to be connected by tele-
phone
Irrigation Accelerated Irrigation Benefit Programme Irrigation facilities to be extended
(AIBP)
Housing Indira Awaas Yojana (IAI) Houses to be constructed for the rural
poor

It is expected that the investments in rural infrastructure
will unlock the growth potential of rural India. The
schemes mentioned above are discussed hereunder.
A. Pradhan Mantri Gram Sadak Yojana (PMGSY)
The primary objective of the PMGSY is to provide all-
weather road connectivity to all eligible unconnected
habitations in the rural areas having population of 500
persons and above. A habitation which was earlier pro-
vided all-weather road connectivity would not be eligible
even if the present condition of the road is bad. It shall
cover only the rural areas. Urban roads are excluded
from the purview of this programme. An all-weather
road is one which is negotiable in all seasons of the year.
B. Rajiv Gandhi Grameen Vidyutikaran Yojana
(RGGVY)
Ministry of Power launched Rajiv Gandhi Grameen Vi-
dyutikaran Yojana (RGGVY) as one of its flagship pro-
gramme in March 2005 with the objective of electrifying
over 1 lakh un-electrified villages and to provide free
electricity connections to 2.34 crore rural BPL house-
holds.
C. Accelerated Rural Water Supply Programme
(ARWSP)
Providing rural areas with safe drinking water facilities
was one of the key objectives of the plan.
D. Village Public Telephones (VPT)
Telephone connectivity constitutes an important part of
the effort to upgrade the rural infrastructure. It aims at
increasing the rural telecommunication facilities by 40%.
It also aims to supply broadband and Bharat Nirman
Seva Kendras in 2.5 lakh panchayats. According to this
plan, the government of India will connect each and
every village by telecommunication facilities.
E. Accelerated Irrigation Benefit Programme (AIBP)
The irrigation component of Bharat Nirman aimed at
creation of irrigation potential of 10 million hectare dur-
ing 4 years i.e. from 2005-06 to 2008-09. The target for
creation of irrigation potential was proposed to be met
through completion of on-going major and medium irri-
gation projects, extension, renovation and modernization
of major and medium irrigation projects etc. Emphasis
was also laid on repair, renovation and restoration of
water bodies.
F. Indira Awaas Yojana
IAY is one of the very popular schemes of the Ministry
of Rural Development and has caught the attention of the
rural people. It is a rural housing project for the poor. It
has been in operation since 1985-86. The objective of the
IAY is to provide financial assistance for construc-
tion/upgradation of houses to BPL rural households be-
longing to SCs, STs, freed bonded labourers, non-SC/ST

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 Journal of Business Management & Social Sciences Research (JBM&SSR)
Volume 3, No.9, September 2014
rural households, widows and physically handicapped
persons living in rural areas.
Provision of Urban Amenities in Rural Areas
(PURA)
The primary objective of the scheme is the provision of
livelihood opportunities and urban amenities in rural
areas to bridge the rural-urban divide.
National Bank for Agriculture and Rural
Development (NABARD) and Regional Ru-
ral Banks (RRBs): A Look
NABARD is set up as an apex Development Bank with a
mandate for facilitating credit flow for promotion and
development of agriculture, small scale industries, cot-
tage and village industries, handicrafts and other rural
crafts. It also has the mandate to support all other allied
economic activities in rural areas, promote integrated
and sustainable rural development and secure prosperity
of rural areas. In discharging its role as a facilitator for
rural prosperity, NABARD is entrusted with providing
refinance to lending institutions in rural areas, bringing
about or promoting institutional development and eva-
luating, monitoring and inspecting the client banks. NA-
BARD has effectively brought in a number of innova-
tions in the rural credit domains. Some of these innova-
tion are: Formation and linkage of SHGs, Farmers Club,
Rural Infrastructure Development Fund, Watershed De-
velopment, Kisan Credit Card, District Rural Industries
Project.
RRBs in India are an integral part of the rural credit
structure of the country. The Government of India set up
Regional Rural Banks (RRBs) on October 2, 1975. In-
itially, 5 RRBs were set up on October 2, 1975, which
were sponsored by Syndicate Bank, SBI, Punjab Nation-
al Bank, United Commercial Bank, and United Bank of
India. Capital sharing being 50% by the central govern-
ment, 15% by the state government and 35% by the
sponsored bank i.e. NABARD. The objective of the bank
is to develop rural economy by providing credit and de-
posit facilities for agriculture and other productive ac-
tivities of all kinds in rural areas. It also provides facili-
ties to small and marginal farmers, agricultural labour-
ers, rural artisans and other small entrepreneurs in rural
areas. So the RRBs have been playing a catalyst role in
the development of rural areas. They have been playing a
significant role in financing the weaker section of the
community in the rural areas and also in inculcating
banking habits among the rural masses.
Schemes/Programmes of NABARD: At a
Glance
a) Self-help Group (SHG) Bank Linkage Pro-
gramme: The SHG-Bank Linkage Programme is
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ISSN No: 2319-5614
a major plank of the strategy for delivering finan-
cial services to the poor in a sustainable manner.
It was started as an Action Research Project in
1989, which was the offshoot of a NABARD in-
itiative during 1987 through sanctioning Rs.10
lakh to MYRADA as seed money assistance for
experimenting Credit Management Groups. The
experiences of these early efforts led to the ap-
proval of a pilot project by NABARD in 1992.
The pilot project was designed as a partnership
model between 3 agencies viz., the SHGs, banks
and NGOs.
b) Kishan Credit Card (KCC): KCC Scheme was
introduced in 1998-99. It was launched to provide
timely and adequate supply of Short Term (ST)
credit from the banking system to the farmers to
meet their crop production requirements in a flex-
ible, hassle free and cost effective manner. The
objective was to provide an instrument, which
would allow farmers to purchase agricultural in-
puts such as seeds, fertilizers, and pesticides and
also withdraw some cash for meeting their pro-
duction-related requirements.
c) Farmers’ Club: The programme aims to organize
farmers to facilitate accessing credit, extension
services, technology and markets. NABARD en-
courages banks to promote Farmers’ Club in rural
areas under the Farmers’ Club Programme, earlier
known as “Vikas Volunteer Vahini (VVV) Pro-
gramme”. Farmers’ Club are grass root level in-
formal forums of farmers. Such clubs are orga-
nized by rural branches of banks with the support
and financial assistance of NABARD for the mu-
tual benefit of the banks concerned and the village
farming community/rural people.
d) District Rural Industries Project: NABARD on
a pilot basis had launched an integrated area-
based credit intensification programme in collabo-
ration with Government, Banks and other devel-
opment strategies with focus on district known as
District Rural Industries Project during 1993-94
with a view to evolving a role model for rural in-
dustrialization.
e) Rural Infrastructure Development Fund
(RIDF): RIDF is a major source of fund for the
development of infrastructure in the rural areas of
the State.
f) Watershed Development: The objective of de-
veloping watersheds is to significantly mitigate
the drought induced distress of farmers in the
area. NABARD anchors 4 types of watershed de-
velopment programmes in the country. These pro-
grammes are: Indo-German Watershed Develop-
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 Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614
Volume 3, No.9, September 2014

ment Programmes, Participatory Watershed De- SHGs of the rural poor with banks. The SHG-Bank lin-
velopment Programme, Prime Minister’s Package kage programme implemented by commercial banks,
in 4 states and Integrated Watershed Development RRBs and cooperative banks has emerged as the major
programme. micro-finance programme in the country. There are 3
models of credit linkage of SHGs with banks – (a) SHGs
Schemes/Programmes Of NABARD: An formed and financed by banks, (b) SHGs formed by
Analysis And Evaluation formal agencies other than banks but financed by banks
and (c) SHGs financed by banks using NGOs and other
A.) SHG-Bank Linkage Programme: agencies as financial intermediaries.
The SHG-bank linkage programme continued to be the
main micro-finance model by which the formal banking With the passage of time, SHGs are increasing in num-
system reaches the micro entrepreneurs (including far- bers and contributing a lot for women empowerment and
mers). To provide the rural poor accessibility to credit poverty alleviation. The progress of SHGs-Bank linkage
from the banking system and for alleviating poverty, programme during the period from 1992-99 to 2009-10
NABARD in 1992 had started a programme of linking is shown in Table-1.
Table-1
Progress of SHGs-Bank linkage programme
Year SHGs financed by Banks (Number in Bank Loan** (Rs. Crore)
lakh)
During the year Cumulative During the year Cumulative
1992-99 0.33 0.33 57.1 57.1
1999-00 0.82 1.15 135.9 193.0
2000-01 1.49 2.64 287.9 480.9
2001-02 1.98 4.61 545.5 1026.3
2002-03 2.56 7.17 1022.4 2048.7
2003-04 3.62 10.79 1855.53 3904.21
2004-05 5.39 16.18 2994.25 6898.46
2005-06 6.20 22.39 4499.09 11397.55
2006-07 11.06* 28.95@ 6570.39 12366.49$
2007-08 12.28* 36.26 8849.26 16999.90$
2008-09 16.09 42.24 12256.51 22679.85
2009-10 15.87 48.52 14453.30 28038.28
Source: Data compiled from Economic Survey- 2002-03 to 2010-11 and NABARD
* Include existing SHGs also, which were provided repeat bank loan
** Includes repeat loans to existing SHGs
@ From 2006-07 onwards, data in respect of number of SHGs financed by banks and bank loans are inclu-
sive of SHGs financed under the Swarnajayanti Gram Swarozgar Yojana (SGSY) and the existing groups
receiving repeat loans. Owing to this change, NABARD discontinued compilation of data on cumulative
basis from 2006-07. As such data from 2006-07 onwards are not comparable with the data of the previous
years.
$ Represents outstanding

Table-1 manifests the increasing trend of the number of
SHGs financed by banks during the period from 1999-00
to 2009-10. The programme of micro finance has been
making rapid strides. During the year 1999-00, 0.82 lakh
SHGs were linked with banks as against 0.33 lakh SHGs
during 1992-99. In 2009-10, the numbers of SHGs have
substantially increased to 15.87 lakh as compared to 0.33
lakh in 1992-99. The amount of loan disbursed increased
accordingly. The notable features of the programme are
the active participation of women and timely loan re-
payment.
As on 31st march 2011, there were more than 74.62 lakh
savings linked SHG and more than 47.87 lakh credit-
linked SHGs covering 9.7 crore poor households under
the micro-finance programme. The SHG-Bank Linkage
Programme was given a renewed thrust with the launch
of SHG-2.
B.) Kishan Credit Card (KCC):
The KCC scheme, introduced in 1998-99, has been very
popular among the farmers. The implementation of KCC
scheme has been taken up by 27 commercial banks, 378
District Central Cooperative Banks/ State Cooperative
Banks and 196 Regional Rural Banks (RRB) throughout

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 Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614
Volume 3, No.9, September 2014

the country. Kishan Credit Cards issued and amount Banks (PSCB) during the period from 1998-99 to 2009-
sanctioned by the Cooperative Banks (CB), Regional 10 have been displayed in Table-2.
Rural Banks (RRB) and Public Sector Commercial

Table-2
Agency-wise KCC issued (Number- In lakh) and the sanctioned amount (INR: In Crore)
(1998-99 to 2009-10)
Year Cooperative Banks Regional Rural Banks Public Sector Commercial Banks
Number Sanctioned Number Sanctioned Number Sanctioned
(In Lakh) Amount (In Lakh) Amount (In Lakh) Amount
(In Crore) (In Crore) (In Crore)
1998-99 1.56 826 0.06 11 6.22 1473
1999- 35.95 3606 1.73 405 13.66 3537
2000
2000-01 56.14 9412 6.48 1400 23.90 5615
2001-02 54.36 15952 8.33 2382 30.71 7524
2002-03 45.79 15841 9.64 2955 26.81 7387
2003-04 48.78 9855 12.74 2599 31.00 9331
2004-05 35.56 15597 17.29 3833 43.95 14756
2005-06 25.98 20339 12.49 8483 41.65 18779
2006-07 22.97 13141 14.06 7373 48.08 26215
2007-08 20.91 19991 17.73 8783 46.06 59530
2008-09 13.44 8428 14.15 5648 58.34 39009
2009-10 17.43 7606 19.49 10132 53.13 39940
Total 378.87 140594 134.19 54004 423.51 233096
Source: Economic Survey-2002-03, 03-04, 06-07, 09-10, 10-11, Annual Report (NABARD)-2007-08,
and Kurukshetra, June, 2011

The scan of Table-2 manifests the fluctuating trend of
issuance of Kishan Credit Cards by CBs, RRBs and
PSCBs. It is also observed that PSCBs issued maximum
numbers of cards (423.51 lakh) during 1998-99 to 2009-
10 as compared to CBs (378.87 lakh) and RRBs (134.19
lakh). If the sanctioned amount is taken into considera-
tion, it is also noticed that the amount sanctioned by
PSCBs is much more than that of CBs and RRBs. More-
over, it may state that the banking institutions are play-
ing a pivotal role with regard to issuance of Kishan Cre-
dit Cards. The fluctuating trend of issuing cards and the
sanctioned amount may be due to the ignorance of far-
mers about the scheme, and the nonchalant attitude of
the implementing authority.
C. Farmers’ Club:
During 2010-11, 21,903 Farmers’ Club were launched,
taking the total number of clubs to 76,708 as on 31st
March 2011. Agency-wise, NGO promoted maximum
number of clubs (13,599), followed by cooperative
banks (2,922), commercial banks (2,733), and RRB
(2,215). During the year (2011-12), 25,238 Farmers’
Clubs were launched by different agencies with NA-
BARD support, taking the total number of such clubs to
around 1,01, 946.
D. District Rural Industries Project (DRIP):
NABARD launched DRIP in collaboration with gov-
ernment, banks and other development agencies with
district specific focus. It was introduced with the objec-
tive of creating sustainable employment opportunities in
106 districts all over the country.
E. Rural Infrastructure Development Fund (RIDF):
Another all-time high was achieved by NABARD under
Rural Infrastructure Development Fund (RIDF) by dis-
bursing Rs.14,970 crore during 2011-12, which was
Rs.2,900 crore or 24% more than the disbursements
made to state governments during 2010-11. Sanctions
given by NABARD under the RIDF also increased to
Rs.21,460 crore , which was over Rs.3,000 crore more
than the sanctions during the previous year (growth of
17%). These loans are used by State Governments to
create infrastructure in agriculture and allied sectors in-
cluding irrigation and power, rural connectivity through
rural roads and bridges, health, education, rural drinking
water supply etc.
F. Watershed Development:
NABARD’s total commitment under watershed devel-
opment programme rose to Rs.1600 crore, covering an
area of about 1.78 million ha. Disbursement of Rs.272
crore under Watershed Development programmes anc-

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 Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614
Volume 3, No.9, September 2014

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